New price regulation in essential medicines; Drug firms skeptical

NEW DELHI: The government may give drug firms just 45 days to comply with the upcoming pricing regime that promises cheaper essential medicines, making it mandatory for companies to conform to revised rates irrespective of the date of manufacture.

A government official, who did not wish to be named, told ET that the decision was being taken in the interest of consumers ahead of the notification of revised price regulation for 348 drugs listed in the National List of Essential Medicines. "In view of consumer interest, the manufacturers cannot be left free to sell the previous batches at earlier prices," the official said, adding that the government feared abuse of the provision if it allowed the drugmakers to revise rates from subsequent batches.

The industry executives, however, said that the directive could lead to chaos and even shortage of essential drugs in the short term. Changing the price labels of existing stocks lying with the retailers or distributors to comply with the new price norms would be extremely difficult, they said, as they would have reach out to five lakh chemists in the highly fragmented Rs70,000 crore domestic market. "We had requested the government to make the changes applicable from subsequent batches.

But it is extremely difficult to recall batches from every nook and corner from a logistics perspective," said a leading firm's head of supply chain, adding, "In addition, we will have to incur a loss on account of price cuts, re-labelling and additional freight movement. Amid all this to and fro, we will also lose substantial shelf life of the drugs."

The official quoted earlier said that the government had factored in that the trade channels usually stock inventory for a period of 42 days or six weeks and keeping in mind logistical challenges, it may allow pharma firms to send a supplementary price list of revised prices that the retailers will have to display in premises.

"But this wouldn't help. The moment retailers realise that they will be making losses (on account of price cut and shrinking margins under new regime) on essential drugs, they will return stocks to wholesalers, who in turn will push it back to drug makers," said an industry executive.